Kellogg CompanyK

Morningstar Rating

Stock Research and Analysis

by Erin Swanson, CFA

We remain impressed by Kellogg's ability to produce solid sales and profit growth, despite rising commodity costs and weakening economic conditions. In our opinion, the firm's continued focus on driving efficiency improvements and its subsequent investments Read more

Bulls Say

With top-selling brands like Special K, Frosted Flakes, Corn Flakes, Rice Krispies, and Froot Loops, Kellogg is the leading domestic producer of breakfast cereals, with more than 33% market share.

Strong brands, product innovation, and an impressive direct-store-delivery system have allowed Kellogg to capture more than 5% of the estimated $60 billion domestic market for snack foods annually.

Kellogg's investments in product innovation appear to be paying off in spades. In 2008, the firm generated $2 billion (or 15% of its sales) from products that were introduced over the past three years.

By using nearly 8% of its sales to fund its advertising and promotion, Kellogg appears well positioned to present the value proposition it believes it offers to consumers in this tight spending environment. Read more

Bears Say

Although we have been impressed by Kellogg's ability to generate above-average sales and earnings growth, we don't believe this level of growth is sustainable, given the competitive nature of its markets and the rising costs associated with its operations.

Elevated commodity costs are taking a bite out of profits throughout the packaged food industry, and Kellogg is no exception.

Through their Cereal Partners Worldwide joint venture, General Mills and Nestle enjoy more than a decade's head start on Kellogg in key emerging markets, such as China and Eastern Europe.

Kellogg recently voluntarily recalled some of its products containing peanut butter because of a salmonella scare. As a result of this recall, the firm incurred charges that lowered first-quarter 2009 earnings per share by $0.05 per share. Read more

Strategy

Strategically, Kellogg is focused on expanding the distribution of its cereal and snack product offerings domestically and abroad. To drive this growth, the firm is constantly pursuing cost-efficiency Read more

Management

In our opinion, Kellogg benefits from the knowledge and experience that CEO David Mackay brings to the table. Mackay assumed the top spot at Kellogg at the end of 2006, after spending a good portion of his career at this leading packaged food firm in Read more

Profile

Founded in 1906, Kellogg is a leading global producer and marketer of cereal, cookies, crackers, and other convenient foods. The firm's offerings are manufactured in 19 Read more

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